Dear shareholders,
Last decade was the decade of Mobile Telephony Revolution and the focus
was to give Indian Consumers access to ''Dial Tone'', this decade we are
poised to witness a Mobile Internet Revolution that will focus to give
the Indian Consumers access to an Information Tone.
The Mobile Internet Wave has swept most developed markets and is only
time before it hits our shores and Mobile Internet becomes a part of
our daily life. Our team at S Mobility has kept its ear to the ground
so as to best understand the pulse of the Indian consumer and when will
they start to adopt Mobile Internet. On the back of these learnings, we
have introduced some cutting edge offerings to enthuse both the rural
and urban buyers. We have been able to swiftly respond to consumer
needs and aspirations, by leveraging on the strength and diversity of
our integrated business model which comprises of mobile devices, Value
Added Services and a growing retail reach under one umbrella.
Our Product Development units and manufacturing facility offer us the
benefits of cutting edge innovation, scale, efficiencies and state of
the art product options in what is a very fast moving segment. I
believe these would enable your Company to continue in the Spice
Group''s rich tradition of being the ''First to Market'' and the first to
spot emerging trends.
During the year under review we have endeavoured tirelessly to harness
our strengths and capabilities to be best prepared to leverage on the
tremendous potential the mobility segment enjoys. We have enhanced our
product portfolio to include some exciting offerings, extended our
market presence and established a deeper connect with the Indian
customer.
I am delighted to inform you that S Mobility also featured in Forbes
2010, as amongst Asia''s 200 Best Billion Dollar Companies.
The indian telecom sector
The Indian Telecommunications network with over 800 million mobile
connections is the second largest in the world. Liberal Government
policies have provided easy market access for telecom equipment and a
fair regulatory framework for offering telecom services to Indian
consumers at affordable prices. The Mobility segment is playing an
important role for the society at large, by making the much needed
communication services available in the rural and semi urban areas
where tele-density is still quite low. Growth of broadband connections
too has been extremely impressive at ~40% since 2008, today touching a
subscriber base of nearly 9 million.
3G as the force multiplier
The arrival of 3G has heralded a faster and more robust Internet,
better access to data services, including e-commerce, social
networking, audio- video conferencing, and many other broadband
applications which require higher connectivity speeds. We see three
distinct directions this will take:
1. The emergence of a new VAS - which will allow the consumer to pay
credit card bills, utility bills, book movie tickets and possibly do
almost any transaction from the convenience of his or her phone.
(Millions of subscribers and many large enterprises have already taken
to these services)
2. The ability to access Internet application and services using
mobile devices will lead to new customer segments accessing the
Internet, and will drive the usage of the Internet for new usage.
(Facebook usage on Mobile is double of its usage on desktop PC)
3. Finally, with the implementation of mobile number portability,
service providers will increasingly depend on Value Added Services and
Mobile Internet as their key differentiators to retain their existing
customers besides attracting With intensifying competition, plummeting
ARPUs against the burden of high employed capital, there is an urgency
for operators to find new revenue streams by investing in new
technologies such as VoIP and other innovative solutions to its
consumers.
The success of the telecommunications sector had so far been restricted
to urban India. Conventionally, subscriber growth and basic voice
services have been the key growth driver for the sector. The
introduction of 3G and later 4G services will play a key role in both
expanding and accelerating this growth. Broadband connectivity and
mobile VAS services are opening\up newer avenues and implementation of
new technologies and data centric applications will result in
efficiency and transparency across operations.
the mobile internet sector
Mobile internet is one of the fastest growing sectors in India. The
enormous appetite for internet content will largely get being driven by
mobile customers as access of internet by mobile subscribers will start
to overtake desktop internet users. Mckinsey projects that the number
of internet users will grow to more than 5 times from the present 81
million between 2010 and 2015. This is supported by the significantly
large young Indian population - ~370 million under 14 year olds which
is 1.5 times that of China!!
The sector''s growth was earlier impeded by several critical anomalies,
including a dismal underdeveloped and overstretched infrastructure, one
key limitation was the availability of limited spectrum. Poor access
and service prevented the efficient flow of even the most basic of
services. The auctioning of more spectrum and efficient usage of the
same by telecom operators is now starting to impact the service
delivery positively.
It is heartening that a large proportion of the growth is contributed
by volume expansion, which is an indication of rising demand and
consumption. ''Handsets in the market today offer consumers ''II great
features at affordable prices. Microprocessors '' have reduced in size
over a period of time, enabling handset manufacturers to compress more
features within devices.
More interestingly, as prices for microprocessors and other parts
reduce, these better features that replace existing components of
handsets do not increase the price of handsets significantly but
rather, keep it reasonably at a steady level or even reduces them at
times. Your Company has been leading the charge in { this evolution and
thus increasingly able to provide consumers with a range of devices and
services at ever more attractive prices.
Let me share with you another growing opportunity. Several of the
international majors have focused on implementing broad and consumer
friendly internet experiences in only English. Thus language has become
a barrier for many in rural areas. Consumers who reside in rural areas
cannot make full use of features that today''s state-of-the-art handsets
have. Catering to the rural masses by developing mobile based internet
properties and offering value added services in regional languages is
one of your Company''s key USPs.
Retail will play a significant role in the growth of Mobile Internet.
Vibrant display, friendly and knowledgeable service personnel, centres
to get a touch and feel of the different services on offer; all help in
creating a stronger bond and a deeper association with the customer. I
invite you to visit and experience our Spice Hotspot stores - besides
getting a look at the latest mobile devices, you will experience our
exclusive Touchscreen kiosks, from which you can easily download some
exciting data and voice applications.
The combination of a regional focus and an integrated business model
with presence across the Mobile Internet value chain, gives S Mobility
the opportunity to create mobile internet solutions that cater to every
corner of the Indian market.
the new entity : s mobility
As you are aware, Spice Mobility has now switched to S Mobility. The
transition of Spice Mobility to S Mobility is not a mere name change
but a transformation that symbolises a uniquely integrated business
model, providing a rich Mobile Internet experience and products and
services which allow convenient access to mobile internet to our vast
consumer base. Your Company''s well synergised business arms come
together to form a unified entity that most efficiently delivers
cutting edge mobile internet solutions. S Mobility possesses scale
efficiencies and offerings that have not been heard of in India before.
The unique business model helps us showcase our expertise in
manufacturing and marketing a wide range of mobile devices including
tablets, establishing our brand presence through 786 stores across 172
cities and the production of Value Added Services for multiple
platforms and operating systems. S Mobility is the first Indian entity
with such a unique and an all-encompassing business model. This
business model caters to the people of both rural and urban regions,
with state-of-the-art and innovative solutions which comprise cutting
edge low cost devices capable of executing a range of data and voice
internet enabled services. These products and services will be
available across the length and breadth of our ever expanding network.
Given our scale and history, I believe we will be able to exploit the
benefits of this new and integrated business model and this will be
soon visible to all.
There is a lot that differentiates your Company from any other player
in the telecommunication space. Clearly the biggest differentiator is
the synergistic 1 blend of an established presence in manufacturing ''
and marketing mobile devices, capabilities to create innovative voice
and data applications and an extensive and growing retail presence.
Another key strength is the size and scale of your Company. With a
current Net Worth of over Rs 8 billion, S Mobility is capable of taking
significant initiatives to drive growth and create value. A third
equally strong advantage is our legacy of many firsts. As you know our
Group was the first to manufacture India''s first copier, India''s first
Personal computer with a 3.5 floppy drive, and set up India''s first 4D
theatre. Your Company too as you would be aware was the first in the
country to introduce a dual SIM handset, a dual memory slot phone, a 12
mega pixel camera phone with CCD sensor and 3x optical zoom and a
projector phone.
Performance Perspective
During the year under review, the Consolidated Total Income of the
Company along with its subsidiaries is Rs. 20,481 million registering a
growth of approximate 63% over the previous year and Net Profit for the
year has almost doubled to Rs. 1040 million as against Rs. 526 million
for the previous year ended 31.3.2010.
This robust performance was driven by strong growth in device sales
volumes combined with healthy Same Store Sales growth. Individual
outlets grew on the back of Spice handsets sales and the introduction
of a range of new VAS offerings.
The year saw a range of new product launches across all our product
lines and introduction of offerings like India''s first 3D screen cell
phone, India''s first projector phone and India''s first 3G android based
smart phones capable of high speed browsing.
Our Vas business also introduced some exciting offerings which included
MITR, an Application Development and Distribution platform that allows
Mobile Developers to develop and deploy mobile applications that run
across handsets and several Operating Systems. Several apps on the MITR
platform are presently available on Airtel
App Store, Blackberry World, Nokia Ovi Store, and other application
aggregators. We also introduced a gamut of applications and content,
with a focus on entertainment, information, music, religion and gaming
all published on a multi-modal platform. A highlight was the live
streaming product Live Aarti I which enabled pilgrims receive online
the blessings I from shrines including Tirupati Balaji, Siddhivinayak,
Shirdi Sai Baba and Shani Shingnapur.
Continued expansion of our retail presence, improving Same Store Sales
growth and growing Spice Hotspot Average Selling Prices which now stand
at over Rs 4,000 also contributed to this strong topline growth.
Demand generation was enabled by high visibility ad-campaigns across a
range of media as well as below the line initiatives. I am sure you
have seen and experienced some of these.
On the supply side, a thrust on organised logistics, proximityv to Sour
manufacturing facility and enhancement of supply chain has contributed
to improved EBITDA and PAT.
Our Board of Directors in line with the Company''s philosophy of sharing
the success of the Company amongst its shareholders recommended a 50%
dividend on the enhanced equity share capital of the Company.
S Mobility will soon establish itself as a key solution provider in the
Mobile Internet space, distinguishing us from other companies. We
believe that we are on the brink of witnessing prospects that are soon
to unravel as market trends globalise. Your Company is well positioned
with both the environment and our highly integrated business model,
offering us vast opportunities for growth. As I have discussed earlier,
the increasing interest and dependence on data networks for almost any
and every activity, the rise of organised retail and the growing number
of tech savvy consumers will all further power our journey.
Going forward we will look to aggressively enhance our scale and
competitive position to become a leading Mobile Internet player. Our
highly capable management team will endeavour to drive this growth
through the introduction of feature rich state of the art aspirational
mobile devices offering a range of Value added and internet enabled
services. We will focus on further entrenching and expanding our retail
presence nationwide so as to be closer to our consumer and consequently
better understand and respond to him or her.
Our growth will be driven through both organic and inorganic
initiatives across the Asia Pacific region, Middle East, and African
regions. We will also look to leverage on the strengths and
capabilities ofjlj our group company, S i2i ,which as you know has an
established presence in several developed and developing markets across
the Asia Pacific region.
A strong Balance Sheet which is debt free with cash reserves of more
than Rs 3 billion, gives us the required war chest to realise our
growth initiatives.
The journey and the opportunities are equally exciting, and I invite
you to participate and enjoy both with us. Let me conclude by thanking
all our customers, employees, vendor Partners, and most importantly
you, our shareholders for your support and contribution in all our
endeavours. I look forward to an even better year ahead.
With Best Wishes,
(Dr. Bhupendra Kumar Modi)
Chairman
